Making Shipping More Transparent

Shipping is a huge and crucial industry. As Rose George, author of Deep Sea and Foreign Going says “Without ships, half of the world would freeze and the other half would starve.”

It is also a largely opaque one. As pirates have known for millennia, the high seas are hard to police. While pirates focused solely on plundering, some unscrupulous, anonymous and unaccountable shippers today commit a much wider array of crimes.

Start with manning the fishing vessels. Ian Urbina of the New York Times recently investigated an employment service based in Singapore that proved to be a human trafficking agency that deceived, exploited and cheated uneducated Filipinos who were kept confined on cargo ships, beaten and starved. If they were put ashore, they were charged large sums to get back their passports and to get transport home. Many never saw their promised pay. The fishing industry may actually be worse than the cargo industry. Urbina has also recently exposed the ways tens of thousands of workers, including children, are outright enslaved on fishing boats every year.

The operating of cargo ships is in some cases equally lawless. Some ships are stolen, renamed, retitled and resold. Some shippers flaunt regulations regarding pollution, dumping oil and toxins and garbage unseen.

The underlying issue, predictably, is accountability, and the first barrier is that ownership can be concealed. Over half of the world’s merchant fleet, measured by deadweight tonnage, is flying under the eleven “flags of convenience”. The 2003 OECD study “Ownership and Control of Ships” found that some open registries “advertise anonymity as a desirable attribute of their registry.” With such perfectly legal devices, law breaking ship owners need not resort to the numerous available corporate mechanisms and institutional arrangements, including bearer shares and nominee shareholders, that make due diligence complicated, time consuming and expensive.

So that is a portrait of the dirty bottom half of the shipping and fishing industries. By contrast, responsible companies, whether ship owners or ship managers, that want to be reliable and trustworthy partners to global trading companies and others in the transportation chain are proactively disclosing their beneficial ownership and other relevant information. There are many ways to accomplish this. My organization, TRACE, recently partnered with RightShip, the global ship vetting platform, to implement an anti-bribery certification program for ship owners. The voluntary certification includes an extensive review and approval process that results in a detailed compliance report. The resulting Compliance Rating will be displayed on the RightShip online risk management platform. Vessel owners must disclose their beneficial ownership along with other critical information about any third parties engaged in operation of the vessels, and the vessels themselves. Dozens of smaller ship owners and logistics companies have already completed this process in order to broadcast their commitment to transparency and integrity, making them attractive partners for global shipping and trading companies.

Some shippers, as Urbina shows, contribute to the lawless seas. But, increasingly, well-governed and compliant actors are driving progress and raising the standard at sea.

Alexandra Wrage is the founder and president of TRACE, an organization committed to increasing commercial transparency and bolstering good governance.